The finance ministry has also decided to marginally hike the interest subsidy to Rs 269.19 crore (Rs 2.69 billion) to LIC for meeting additional cost of providing 9 per cent return to senior citizens under Varishtha Pension Bima Yojana, official sources said on Tuesday.
LIC had demanded capital infusion from the government to meet the stiff solvency norms as prescribed by insurance regulator IRDA.
The other options that LIC was exploring were tapping the IPO market and a government guarantee for meeting the IRDA norms.
LIC has a capital base of Rs 5 crore (Rs 50 million) as provided in the LIC Act of 1956. However, the insurer had set aside about Rs 10,000 crore (Rs 100 billion) specifically for meeting the solvency norms.
However, IRDA wanted LIC to provide another Rs 5,000 crore (Rs 50 billion) over the years. Finance Minister P Chidambaram had promised to assist LIC in meeting the IRDA norms last year when he reviewed the operations of the insurer in Mumbai.
Apart from hiking the capital base, the budgetary support would also help LIC to expand its operations in the domestic and international arena.
LIC is looking at the international footprint to become a global life insurance major and is planning to open offices and branches in Middle East, East Africa and South Africa.
It has also set its eyes on SAARC nations like Bangladesh, Nepal, Maldives and Pakistan once they open up insurance sector for foreign players.
